If India needs to achieve robust economic growth, it needs to consistently draw substantial amounts of Foreign Direct Investment (FDI). Post the economic reforms of 1991, there has been bipartisan consensus across the political spectrum on the issue of FDI.
Both the current Modi government, as well as the previous Manmohan Singh government, made significant efforts to attract investment from different countries. UPA-I witnessed tremendous growth of 625 per cent in FDI, as it rose from $6 billion in 2004-05 to $41.8 billion in 2008-09. But during UPA-II, India witnessed a dip in FDI inflow. Under the leadership of Modi, India has been successful in drawing substantial amounts of FDI.FDI inflow has risen consistently in the last three years. According to a report by the ministry of commerce and industry, FDI inflow to India in financial year 2014-15 was $45.15 billion, around $9 billion more than $36.05 billion recorded in 2013-14. Later, it rose to $55 billion in financial year 2015-16
According to the Department of Industrial Policy and Promotion (DIPP), total FDI investment that India received during April 2016 to March 2017 rose 8 per cent year-on-year to $60.08 billion, indicating that the government's endeavours towards improving ease of doing business and relaxation in FDI norms were yielding results.
During April 2016 to March 2017, India received the maximum FDI equity inflows from Mauritius ($15.73 billion), followed by Singapore ($8.71 billion), Japan ($4.71 billion), Netherlands ($3.37 billion) and the US ($2.38 billion).
Apart from aggressively hardselling India, Modi’s government has taken a number of important steps for drawing FDI. It increased foreign investment upper limit from 26 per cent to 49 per cent in the insurance sector and launched the flagship programme Make in India in 2014, under which the FDI policy for 25 sectors was liberalised further.
Last year in June, the NDA government announced “radical liberalisation” of the FDI regime by easing norms for important sectors such as defence, civil aviation and pharmaceuticals. Now, foreign investors can own the ventures of these sectors completely with the government’s approval.
Modi recently chaired a meeting to review the FDI policy, and the main focus of the meeting was to further liberalise other key sectors such as retail and construction to get more foreign investment.
But the flip side of this increased FDI is that it is concentrated in a few states only, such as Maharashtra, National Capital Region (NCR), Gujarat, Andhra Pradesh and Karnataka.According to a DIPP report, from January to November 2016, five regions - Maharashtra, NCR, Gujarat, Andhra Pradesh and Karnataka - received $34.7 billion, which is 80 per cent of the total FDI received by the whole country in this period. On the other hand, eight eastern states - Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Uttarakhand, Uttar Pradesh and West Bengal - received only around $200 million in the same period, which was only 0.5 per cent of the total FDI in the same period.
This even though all these states have been making various efforts to attract investors by organising investor summits and sending delegations abroad to draw investors. Both the central and state governments are investing heavily in infrastructure development, such as 24-hour power supply and road development.
Governments have also launched reforms and rankings for ease of doing business for all states to make them competitive. The ranking system has been effective, as four of the seven states with the lowest income levels in India found a place in the top ten ranks of 2016.
Interestingly, the low-income states included Chhattisgarh (97.32 per cent implementation rate regarding the 340 reform measures, and fourth rank), Madhya Pradesh (97.01 per cent and fifth), Jharkhand (96.57 per cent and seventh) and Rajasthan (96.43 per cent and eighth) and are all BJP/NDA-ruled. On the other hand, non-NDA-ruled states of Odisha (92.73 and 11th), Uttar Pradesh (84.52 per cent and 14th), Bihar (75.82 per cent and 16th rank) are not doing too well in terms of ranking.
For the overall development of India, it is necessary that all parts of India receive equal investment and attention. PM Modi rightly emphasised in one of his speeches that “if we have to develop India, the chariot of development needs to run on two wheels - eastern and western India”.
Eastern India possesses immense potential with a report by a rating agency (Smera) stating that by 2035, the region has the potential of being a $3 trillion, with Bengal being the hub.
Bihar, Odisha and Bengal are currently ruled by regional parties. The governments of Odisha and West Bengal do not share particularly good terms with the ruling BJP. Both the BJP-led central government and non-NDA parties should move beyond party politics and work for the betterment of these states to attract more FDI.
The PM had said: “The Centre will join hands with the states in working towards the goal since it is possible only with cooperative federalism, wherein the Centre and states work together.”
India needs to take a cue from China, where in the first stage of economic growth only coastal provinces grew but from the 1990s onwards, concerted efforts were made to develop those regions which were lagging behind. Policymakers in India must pay attention to the regional disparities in terms of FDI, and try and address the key challenges.
The International Monetary Fund (IMF) has retained India's economic growth projections at 7.2 per cent in 2017-18, up slightly from 7.1 per cent in the previous year. However, the growth would accelerate to 7.7 per cent in 2018-19, IMF said while also maintaining the growth rate level projected in April.
India's economic growth slowed down to 7.1 per cent in 2016-17, sharply lower than 8 per cent in the previous year due to the effect of demonetisation.
The growth rate clocked in 2015-16 will not be achieved even in 2018-19, according to projections made by the IMF in its overview of the World Economic Outlook.
The growth in 2016-17 would have been lower had the government not intervened in terms of capital expenditure.
"While activity slowed following the currency exchange initiative, growth for 2016 at 7.1 per cent was higher than anticipated due to strong government spending and data revisions that show stronger momentum in the first part of the year," says IMF.
Growth in India is forecast to pick up further in 2017 and 2018 in line with the April forecast, the international organisation said.
Despite China's growth projections being raised by a couple of notches, India's economy would still be the fastest growing among large economies. China's economy is projected to grow by 6.7 per cent in 2017, up 0.1 percentage points from the April forecast, and 6.4 per cent in 2018, up by 0.2 percentage points from earlier forecasts by the IMF.
As such, while India's economy is projected to grow in both 2017-18 and 2018-19, China's economy will expand at the same rate in 2017 – at 6.7 per cent – as it did in 2016. The growth rate in China is projected to be slower in 2018.
IMF has also maintained the same global economic growth rate at 3.5 per cent in 2017 and 3.6 per cent in 2018.
The unchanged global growth projections mask somewhat different contributions at the country level.
US growth projections are lower than in April, primarily reflecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated.
Growth has been revised up for Japan and especially the Euro area, where positive surprises in activity in late 2016 and early 2017 point to solid momentum.
Source: Business Standard
Prime Minister Modi’s currency experimentation has not stopped India’s vibrant economy, which is the world’s 4th fastest growing economy in the world thus far in 2017.
That’s according to the World Bank’s latest edition of Global Economic Prospects. For 2017, India’s economy is expected to advance 7.2 percent. That’s slightly above the country’s long-term growth. GDP Annual Growth Rate in India averaged 6.12 percent from 1951 until 2017, reaching an all time high of 11.40 percent in the first quarter of 2010 and a record low of -5.20 percent in the fourth quarter of 1979, according to Tradingeconomics.com.
The Indian economy has benefited from a stable macroeconomic environment of low inflation and interest rates, which has helped shake off a temporary slow-down in consumer spending and a drop in investment that followed the demonetization program back in November 2016 -- which took 86 percent of the country’s currency out of circulation.
India’s economy has also benefited from ongoing market reforms that have improved competitiveness. For 2016-17, India scored 4.52 points out of 7, according to Global Competitiveness Report published by the World Economic Forum, slightly above its ten year average of 4.33 points. That helped the country climb to rise to the position as the 39th most competitive nation in the world -- out of 138 countries ranked in the report.
The Competitiveness Rank in India averaged 52.73 from 2007 until 2017, reaching an all time high of 71.00 in 2015 and a record low of 39.00 in 2017.
Improved competitiveness, in turn, has helped narrow the country’s current account deficit to 0.70 percent of the country's Gross Domestic Product in 2016. Current Account to GDP in India averaged -1.40 percent from 1980 until 2016, reaching an all time high of 2.28 percent in 2003 and a record low of -4.80 percent in 2012, according to Tradingeconomics.com.
Financial markets have taken notice. The iShares S&P India have gained 20.76 percent over the last twelve months, though those figures are still lagging behind the markets of neighboring Pakistan.
India’s trade with African countries is likely to touch $117 billion by 2020-21 on account of improved economic ties and strong business opportunities, according to a report
Indian exports to the African continent are expected to grow to $70 billion by 2021-22 from $24 billion in 2015 -16 due to rising complementaries, the PHD Chamber of Commerce and Industry said in the report. Imports from Africa too are likely to increase to $47 billion by 2021-22 from $27 billion in 2015-16
“India has been able to intensify its presence in African countries through a significant line a credit worth $10 billion for development projects in Africa over a five-year period,” PHD Chamber President Gopal Jiwarajka said
“With consistent expansion in trade, diversification and widening of products should also be focused on while trading with African nations in the coming years,” he added
He observed that efforts should be made to streamline trade procedures, enhance maritime connectivity and develop robust logistics infrastructure to reduce trade costs and to strengthen trade ties between India and Africa.
Source:The Indian Express
The Indian IT industry's software exports will grow 7-8 per cent and the domestic market 10-11 per cent in the current fiscal 2017-18, said its apex body Nasscom on Thursday.
"The outlook for the IT industry in fiscal 2017-18 (FY 2018) is 7-8 per cent growth in software exports and 10-11 per cent in the domestic market," said the National Association of Software and Services Companies (Nasscom).
The lower revenue outlook comes in light of political and economic uncertainties that impacted decision-making and discretionary spend during the last fiscal (2016-17), it said in a statement.
Noting that digital solutions and niche segments would be the key growth drivers, the industry's representative body said the revenue projection was based on improvements in financial services and high potential in digital business.
"The fiscal year will see growth driven by the modernisation of operations for client firms and the adoption of new technologies such as SaaS (Software As A Service) applications, cloud platforms, BI (Business Intelligence), cognitive and embedded analytics as enterprise customers scale digital projects," said the statement.
Source: Business Insider